The US Supreme Court ruled unanimously that judges do not have to automatically bar companies from using patents that they been shown to have violated. In eBay Inc. et al. v. MercExchange, LLC., a small patent-holding company that won a ruling against the auction site, the Court said judges must use a four-point test to decide if a permanent injunction should be granted against the losing party in patent disputes.

The Court held that according to well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate:

(1) that it has suffered an irreparable injury;
(2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
(3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
(4) that the public interest would not be disserved by a permanent injunction.

The decision to grant or deny permanent injunctive relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion. Earlier, the Court of Appeals for the Federal Circuit ruled that injunctions should be granted as a “general rule.”

The case put a number of large interests on the two sides of the case as Microsoft, Intel and other large technology companies supported eBay’s position that an injunction preventing the continued use of disputed patents hurts innovation and gives patent-holding companies too much leverage in extracting licensing fees. MercExchange, along with the pharmaceutical industry, the federal government and many venture capitalists, argued that injunctions are necessary and useful tool to force infringers to negotiate in good faith.

In the end, the Supreme Court sided with eBay, stating that to grant or deny such relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion. These principles apply with equal force to Patent Act disputes. The court stated that:

According to well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. See, e.g., Weinberger v. Romero-Barcelo, 456 U. S. 305, 311-313 (1982); Amoco Production Co. v. Gambell, 480 U. S. 531, 542 (1987). The decision to grant or deny permanent injunctive relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion. See, e.g., Romero-Barcelo, 456 U. S., at 320.

These familiar principles apply with equal force to disputes arising under the Patent Act. As this Court has long recognized, “a major departure from the long tradition of equity practice should not be lightly implied.” Ibid.; see also Amoco, supra, at 542. Nothing in the Patent Act indicates that Congress intended such a departure. To the contrary, the Patent Act expressly provides that injunctions “may” issue “in accordance with the principles of equity.” 35 U. S. C. §283.2

The bottom line is that this could buy some time for companies hit with an infringement suit to try and get the patent invalidated at the Patent Office. In MercExchange’s case, the U.S. Patent and Trademark Office has issued a preliminary ruling saying that MercExchange’s invention was obvious and should not have been issued. The final outcome will take some time to resolve.

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